We live in hope but must prepare for reality

Image: http://mariafresa.net/single/2331548.html

Arts and heritage minister Michael Ellis told the Art Business Conference on September 4: “It is important that the measures being taken to regulate the ivory trade are balanced with considered exemptions.”

A week later during the Lords debate at the committee stage of the Bill, rural affairs minister Lord Gardiner of Kimble said the Government would not accept amendments tabled in trade interests and they were withdrawn, albeit with the promise of further debate at the report stage.

Such tabling, rejection and withdrawal of amendments at this stage is normal under parliamentary convention, as it puts the Government on notice of serious future challenges without disrupting the passage of legislation – it is at the report stage that the battle will be lost and won.

Exemptions under the Bill are narrow indeed. Last October, environment secretary Michael Gove introduced the Government consultation, saying: “Ivory should never be seen as a commodity for financial gain or a status symbol – so we want to ban its sale. These plans will put the UK front and centre of global efforts to end the insidious trade in ivory.”

On January 31 the then foreign secretary Boris Johnson praised China for its decision to close down its entire domestic ivory market, describing the UK as “united” in its perspective with China and “more forward looking and ambitious in our ban than the European Union itself”.

Johnson added: “Whilst I’m on the subject of ivory, don’t forget, as we work to save the elephant, the threat then moves across to the hippo, and the narwhal, and other bearers of ivory in their jaws.

“And so I am very glad to say that earlier today also that the Hong Kong Legislative Council voted to end the Territory’s ivory trade by 2021, with no compensation for dealers.”

With public opinion overwhelmingly on the side of a total ban, and the diplomatic and political prize of the International Conference on the Illegal Wildlife Trade next month, a significant shift in policy looks unlikely.

The imminent conference is also a major incentive for the Government to rush the bill through, but, as Lord Judge has pointed out, this hastiness has serious implications if it means the failure to amend a clause that allows the secretary of state to invest search and seizure powers in civil servants, rather than restricting them to the police.

Exemptions and how they might work

Items with more than 10% ivory content qualifying for exemption must be “of outstandingly high artistic, cultural or historical value”, taking into account their rarity, “the extent to which the item is an important example of its type” and “any other matters specified in guidance issued by the secretary of state”.

Few people outside the trade have the knowledge to decide this, and limited time and resources will restrict any reviewing committee. Items failing to qualify under the ‘Outstanding’ exemption can only be sold or gifted to a designated museum. If museum curators sit on the committee, this risks a potential conflict of interest.

An exemption covering pre-1918 portrait miniatures, pre-1947 pieces and pre-1975 musical instruments with less than 10% intrinsic ivory content rules that they must be registered with the secretary of state, who would issue confirmation of the registration, which would then go on record for future transactions. However, the detail required, along with the payment of an as-yet unspecified fee, might well deter applications for cheaper pieces.

Hong Kong’s enforcement starts in 2021. UK Government rules stipulate transitional periods for businesses to adapt for such legislation, especially where no compensation is due. This should delay enforcement until at least 2021 if not later.

But with the prospect of a near-total ban, who is prepared to invest in ivory now?

In future, valuers must identify if an object’s de minimis content is indeed elephant ivory or another banned material. Time and cost will determine whether they bother or simply refuse to consider anything with ivory content.

If so, this would help with enforcement. As Shadow Environment Minister Lord Grantchester noted during the Lords debate, the CITES border force comprises just ten members, while the National Wildlife Crime Unit has just 12, including admin staff and no funding commitment beyond 2020. Meanwhile the OPSS (Office for Product Safety and Standards), which will oversee the process, has no expertise in this area.

If antique ivory loses all value as a commodity, and becomes socially unacceptable, museums will come under pressure not to accept donations and remove it from display. Then, at best, it will go into storage. If so, how long before pressure on space and preservation costs lead to a relaxation of de-accessioning rules? If that happens, then destruction becomes a greater risk.

The exemption for portrait miniatures makes sense; the failure to protect other treasures for similar reasons less logical.

Michael Ellis’s promise of “balanced [and] considered exemptions” is a straw to clutch if nothing else.

Well, as the ex-boss of a global payment system challenged by the whole concept of crypto currency, he would say that, you might argue.

However, Harris has a point. The real challenge for an alternative global system of value exchange is not for it to be a wealth creation exercise for the elite, but an effective method of transfer that is stable, cannot be manipulated by institutions or governments, protects the individual, has an intrinsic value and can be used quickly for ordinary, day-to-day transactions.

It should also act as a barrier to crime, particularly money laundering and terrorism financing, and offer a reasonable alternative to expensive wire transfers for the ‘unbanked’.

That is why I have become involved in the programme to promote Kinesis, which has the potential to achieve all of these objectives.

Being hailed by its developers as a “blueprint for the future of money”, Kinesis is a wholly integrated value exchange system linking to a globally accessible crypto currency directly backed 1:1 by hard assets in fully insured gold and silver held in third-party vaults across the world, giving it an intrinsic value. These holdings will be subject to semi-annual third-party holding audits. To put that in perspective, the last full audit of the gold held in Fort Knox took place in 1954. The Kinesis system is ethical because it’s based on LBMA (London Bullion Market Association) bars, and it’s officially recognised via the legacy system, with all associated taxes paid.

In short, Kinesis is an ethical system that enhances money as both a store of value and a medium of exchange.

This is not a gimmick that has suddenly emerged from nowhere, but a system carefully devised over seven years, based on London’s accredited Allocated Bullion Exchange (ABX), the world’s leading electronic institutional exchange for allocated physical precious metals.

Kinesis can never be sold below the current price of gold or silver

“We provide a value and a unit of account and we solve the medium of exchange issue, while the system produces a yield,” says Kinesis CEO Thomas Coughlin.

The only way to bring this currency to the people is to digitize it and allow it to trade in very small amounts.

Kinesis can never be sold below the current price of gold and silver thanks to the direct allocation policy, which gives it stability. Transactions take just 2-3 seconds and are proportionate to what you are buying, so, unlike other crypto currencies, this one can actually be used in day-to-day transactions like buying a cup of coffee.

And when you pay over the currency unit, which can be allocated using your Kinesis debit card, you are also paying over that percentage share of the gold or silver that goes with it, gram for gram. At the same time, transactions costs* are a fraction of alternatives, making the whole system viable for day-to-day use in even small amounts. The Kinesis debit card can also be used to access cash at ATMs.

Another incentive to use the system over others is that all of those involved in it are paid a fractional share of the transaction fees, making it a unique multifaceted yield system. This promotes the growth and use of Kinesis as a medium of exchange while distributing back the wealth to the system’s users, encouraging the rapid movement of money around its network.

What this also means is that for the first time ever precious metals attract yield as physical assets in a way that encourages trade and transactions.

What’s more, Kinesis is Sharia compliant because it makes its yield from transaction fees not interest.

One of the Kinesis currencies’ (1 KAU = 1 gram of gold and 1 KAG = 10 grams of silver) most important features is the security they provide for users.

With unbacked crypto currencies, the title can be held by the exchange and the end user holds a warrant to that title. This is why crypto exchanges get hacked, because they are effectively treasuries.

Likewise, depositing money in a bank in the traditional way effectively means taking on bank risk where you are exposed above the guarantee limit. Kinesis does not expose you in this way because it is backed gram for gram by gold and silver. There is no counter-party risk because the depositor retains title to the gold and silver represented by their deposit. With paper deposits, the bank retains title and issues a warrant of title to the depositor. If the bank fails, the risk is passed on to the paper depositor above the guarantee limit. Remember the Cyprus depositors of 2012-13, who lost access to their funds and took a government-sanctioned ‘haircut’? With Kinesis, that can’t happen.

Other new developments in crypto currency are trying to build in stability by pegging themselves to fiat currencies, but that will leave them exposed to the usual banking risks detailed above.

The fractional cost of transactions also make the Kinesis system far more attractive to the ‘unbanked’, like migrant workers wanting to send funds home to their families in other countries. Currently, they are forced to use services like Western Union, which can charge anywhere between 5% and 25% of the money being transferred in fees, whereas Kinesis fees are limited to 0.45%.*

ABX has already raised the entire call for backing it needs to launch the system (around $250 million) through the issuing of Kinesis Velocity Tokens (KVT). It will continue to sell KVTs up to the limit of 300,000.

How Kinesis Velocity Tokens work

KVT holders are effectively stakeholders in the success of the system and will receive a 20% proportional share of the transaction fees from the Kinesis Monetary System ongoing. The more successful the system, the more money KVT holders stand to make. But what is different this time is that ABX has prevented institutions from muscling in and taking a concentrated position, scooping up huge holdings of KVT, which would risk compromising the system. Instead they have prioritised small investors. Institutions can get involved, but allocations to them have been strictly limited to ensure genuine system independence in the future.

Unlike bitcoin, Kinesis does not use up vast amounts of energy in the ‘mining’ process. The process is a simple one of exchange: you buy it with fiat currency.

Why would countries back you when what you are doing would limit their ability to control currency? Because most governments hate cash as it limits their ability to fight crime like terrorism. Kinesis digitises the system and anyone who wants to participate has to go through a vigorous Know Your Customer (KYC) process, working through Unified Signal, before they can gain access to it. Unified Signal control every cell phone for billing in the US, as well as the medical systems for the US, and provide the digital wallet through which Kinesis operates. This means there is no way of laundering the money through the system. You have to establish credibility before you are allowed to join. It also means that governments who adopt Kinesis will be more empowered to tackle tax evasion and terrorism financing, while generating additional income from transaction fees as a system user. Think how that could transform the fortunes of African countries currently beleaguered by corruption and the wholesale plundering of their assets.

It doesn’t take a genius to see how this could have additional applications in areas such as provenance and international transactions for the art market, another area of great interest to me.

So who has Kinesis convinced so far?

Well, the Indonesian Post Office for one. It has signed up to use Kinesis in the handling of its $12.5 billion of assets. Deutsche Bourse is set to become a liquidity provider to Kinesis too.

With an unblemished track record, which it is vital to retain, there is much at stake for the ABX in the intrinsic reliability and honest robustness of Kinesis.

Credibility and reputation at work

And look at the Kinesis advisory board. Among others, it includes Andrew Maguire, arguably the most important whistle-blower in the history of bullion banking, who in 2010 exposed the manipulation of the precious metals markets to the US Commodity Futures Trading Commission (CFTC). He effectively risked his life to do this when, instead, he could have sat back and exploited his knowledge to makes millions but was sickened by the cost in broken lives that the corruption and manipulation of the silver markets led to.

Other members include Padraig Seif, CEO of Finemetal Asia Ltd, and Axel Diegelmann, MD of Trisuna-Lagerhaus AG and co-founder of the Lichtenstein Precious Metals Group). Watch this space for additional names with game-changing reputations to be added to that list.

As confidence in the traditional banking system wanes further and existing crypto currencies continue to give the impression of Wild West gambling dens, trust, reliability and stability have never been more important.

Kinesis has impressed me more than any other proposed value exchange system and shows the best chance I have seen of solving the problems that dog other forms of banking, investment and exchange. That’s why I’m putting my money where my mouth is.

Data privacy is getting a long-overdue overhaul with GDPR, but is the art market ready?

Barely four months before it becomes law, much of the UK art market has yet to address what is billed as the most important change in data privacy regulation in 20 years.

The General Data Protection Regulation (GDPR) comes into force on 25 May to protect European Union citizens against privacy and data breaches, replacing the previous 1995 law. The new law aims to give individuals more power over how and where their personal data is used by companies “in an increasingly data-driven world that is vastly different from the time in which the 1995 directive was established”, according to the UK Information Commissioner, which will enforce the law in Great Britain.

Organisations that fail to implement the changes risk heavy fines of up to 4% of global turnover or €20m (whichever is greater), and it will apply to the UK regardless of Brexit. However, when contacted for this article, few galleries or other art market concerns had even begun to plan for the changes.

One organisation that has taken action is the Society of London Art Dealers (Slad), which circulated a briefing from the art lawyer Simon Stokes of Blake Morgan to members in September to alert them to the stringent new regime.

Slad’s director general Christopher Battiscombe says: “The new legislation is causing some concern and it is still not entirely clear what dealers need to do to comply with it, for example in respect of mailing lists. We are seeking legal advice and also putting on a seminar on it for members this month [February].”

Queries over emailing clients

Peter Osborne, the director of London-­based gallery Osborne Samuel, says his main concern is how the gallery can use historic data after May: “Can we carry on selectively emailing and mailing our people or do we have to get their formal consent first? Slad think we should be OK; I do hope this is the case.” He fears that if the gallery has to contact everyone on its existing lists to get them to opt in, only a small percentage will respond and “the people we most want to contact (VIPs and top clients) are just the kind of time-poor people who may not reply.”

Portals, aggregators, online auction platforms and the major auction houses appear to have been more active than the trade so far.

Richard Whittle, the marketing director in the UK and Europe for Invaluable, the live online bidding platform, says: “We believe our certification with the Privacy Shield Framework has a direct correlation to our ability to comply with the upcoming GDPR, and we are currently working to ensure complete compliance with it.”

Christie’s has a team working on the project and expects to be fully compliant by the deadline, with a spokeswoman saying: “Confidentiality is at the core of our business.”

Sotheby’s notes that “there are neither specific exemptions under the regulation for the art market, nor specific requirements pertinent to the art market”, but the auction house states that it knows its obligations and has systems, processes and policies in place that are already compliant.

GDPR centres on the individual’s data, not the organisation processing it, in relation to the offering of goods or services (regardless of whether payment is required), and it applies not just to customers, but to staff, suppliers and others.

Firms must make clear requests for consent to process personal data, stating why they want it and providing easily accessible consent forms, while making it as easy to withdraw consent as to give it—so no more interminable, jargon-filled small print. Tick-boxes for opting in will replace those for opting out.

Attention to detail is essential for avoiding the tiered system of fines. Not having records in order, for instance, could cost 2% of annual turnover. The rules extend beyond data controllers to data processors, such as cloud storage facilities, and contracts between the two must be updated to reflect this.

What the expert says

Ian De Freitas, a partner at London-­based law firm Farrer & Co, has been advising on GDPR for three years and says clients are most concerned with making sure their privacy and marketing policies are compliant.

He identifies the three main impacts for art market businesses as increased risk, culture change within organisations, and a change in relationships with clients, contributors, employees and service providers.

“Companies should focus initially on making it appear for outward purposes that they are compliant with GDPR,” De Freitas says. “They need to look at the privacy policies and the terms and conditions they offer their customers to make sure they are GDPR-compliant. That still takes quite a bit of work, because you have to know what you are doing with data and that it is completely lawful, and you must also put it all in simple language.”

The UK Information Commissioner overseeing this process, however, faces a lack of clarity from European regulators. Operating as the Article 29 Working Party, the regulators are supposed to issue common guidance, “but they have not been very good at doing this”, De Freitas says, “and their language is not clear at all. They have also only issued guidelines in some areas and occasionally in my view they have strayed beyond what GDPR ­actually requires.”

Regardless of this, once the law changes, the regulators will apply their own interpretation of the rules and the only place to test this will be in the courts, De Freitas says.

Limited resources will force ­regulators to focus initially on larger organisations in other sectors, such as banking, insurance, technology and retail, he adds. However, they must investigate individual complaints, so reactive investigations could target anyone, including art businesses. “Therefore, if you get any challenges from individuals, be very careful how you respond to these after 25 May, as it could lead to an investigation,” De Freitas cautions.

Firms must review how they share data internally and with other organisations and will have to re-engineer employment contracts as employees’ subordinate status means they cannot freely consent to data permissions.

“GDPR is odd because although it is supposed to be a European-wide measure the member states couldn’t agree on everything, so certain areas will be dealt with country by country,” De Freitas says. “These include areas of employment law, the processing of criminal data and freedom of expression. The UK government is in the process of introducing a new Data Protection Bill, which will fill the gaps, but it is very late in the day and won’t give everyone much time to accommodate UK-specific rules.”

The countdown TO “ZERO DAY” BEGINS

Ian De Freitas of the law firm Farrer & Co identifies the key requirements for GDPR compliance by 25 May 2018

“As ‘Zero Day’ approaches, businesses within the art market need to remember that cleaning up old data takes time and a lot of hard work, so leaving everything to the very last minute is not an option,” De Freitas says. “We have had nearly two years to get ready and it is getting a bit late, so businesses should act immediately. There will be very little sympathy for those that do not.”

Establish leadership and assign responsibility. Set up your team and allocate the budget to deal with this process.

Map personal data. How do you acquire, use and share it?

Analyse processes for compliance.Establish risks and your approach to them.

Implement change. For example, obtain renewed consent for holding and using data, amend and reissue privacy policies, and revise service provider contracts.

Preparing for the General Data Protection Regulations (GDPR)

You should make sure that decision makers and key people in your organisation are aware that the law is changing to the GDPR. They need to appreciate the impact this is likely to have.

Information you hold

You should document what personal data you hold, where it came from and who you share it with. You may need to organise an information audit.

Communicating privacy information

You should review your current privacy notices and put a plan in place for making any necessary changes in time for GDPR implementation.

Individuals’ rights

You should check your procedures to ensure they cover all the rights individuals have, including how you would delete personal data or provide data electronically and in a commonly used format.

Subject access requests

You should update your procedures and plan how you will handle requests within the new timescales and provide any additional information.

Lawful basis for processing personal data

You should identify the lawful basis for your processing activity in the GDPR, document it and update your privacy notice to explain it.

Consent

You should review how you seek, record and manage consent and whether you need to make any changes. Refresh existing consents now if they don’t meet the GDPR standard.

Children

You should start thinking now about whether you need to put systems in place to verify individuals’ ages and to obtain parental or guardian consent for any data processing activity.

Data breaches

You should make sure you have the right procedures in place to detect, report and investigate a personal data breach.

Data Protection by Design and Data Protection Impact Assessments

You should familiarise yourself now with the ICO’s code of practice on Privacy Impact Assessments as well as the latest guidance from the Article 29 Working Party, and work out how and when to implement them in your organisation.

Data Protection officers

You should designate someone to take responsibility for data protection compliance and assess where this role will sit within your organisation’s structure and governance arrangements. You should consider whether you are required to formally designate a data protection officer.

International

If your organisation operates in more than one EU member state (ie you carry out cross-border processing), you should determine your lead data protection supervisory authority. Article 29 Working Party guidelines will help you do this.

A series of documents to help organisations prepare for GDPR can be found on the Information Commissioner’s website: ico.org.uk

This article first appeared in The Art Newspaper, both online and in print in the 298 February 2018 issue

The UK-EU Brexit deal announced earlier this week appears to have reassured and annoyed people in equal measure. Certainly it raises questions over the wording of the content, with some pledges apparently contradicting others.

For instance, it is difficult to see how an undertaking to maintain Northern Ireland’s alignment with the EU internal market is consistent with it leaving the internal market along with the rest of the UK after Brexit. In other words, parts of the agreement, when looked at closely, give the impression of being no more than sticking plasters. If so, trouble lies ahead as it will prove impossible not to break one promise while honouring another.

EU negotiators have been keen to protect Theresa May in the run-up to, and announcement of, the Brexit deal for fear of her government collapsing and Jeremy Corbyn taking power. The DUP has (for now) accepted the terms of the deal, but one wonders what Mrs May had to say to Arlene Foster to reassure her that all would be fine in the end. Elements of the commentariat now argue that the terms of the agreement are so ill-defined that the UK will be able to interpret them as it wishes in the long term, the sort of reassurance that might have persuaded Mrs Foster to sign up to them. Others believe that this looseness only plays into the hands of the EU, which will be able to dictate terms during the transitional period when the European Court of Justice continues to hold sway, however narrowly.

None of this sets the scene for a happy Brexit outcome.

Michael Gove’s intervention, reassuring the public that they will be in control of what eventually happens via the ballot box, is significant because it hints at what may well happen next.

If the May Brexit deal begins to unravel – and I would not bet against this – Cabinet frustration is likely to boil over to the extent that it overcomes the fear of Corbyn at the ballot box. If that happens, leadership challenges will arise from both sides of the Brexit divide. Remainers, led by Amber Rudd or perhaps Jeremy Hunt, will pledge that a vote for them will mean staying in the Customs Union and Single Market, as well as keeping the jurisdiction of the ECJ, while a Johnson/Gove/Patel ticket is likely to pledge a hard Brexit – both sides distinguishing themselves from Labour by offering clarity and a real choice to an exasperated electorate.

Another change of Conservative leader over Brexit will have to mean a general election

It is hard to see how, with another change of leadership, the Conservatives can press ahead with a new policy on Brexit without the mandate of a general election. In the event that an election is called, Labour will capitalise on the youth vote, better discipline and the firm grasp of social media that the Tories lack when it comes to issues such as tax, welfare and the NHS, but will suffer if it does not remove its fudge on Brexit, especially if the Conservatives vote in a leader who comes down clearly on one side or the other.

For the Conservatives, a lurch to one side of the Brexit debate or the other risks alienating a significant proportion of their traditional support, splitting the vote for a right of centre government and thereby playing into Labour’s hands.

Labour has everything to gain. Firstly, because after close to eight years of the Tories under two prime ministers – and with no untarnished candidate on the horizon to take over as leader – public patience with the incumbent administration has worn very thin indeed. Secondly, the recent incompetence and negotiating weakness of the May team has also undermined the electorate’s confidence.

However, Labour is far from unified, and a real fear of Momentum’s influence and how the political landscape might change if Corbyn and McDonnell achieve power may well stay the hand of voters in the polling booth. Many sympathise with the left’s NHS, welfare and education spending plans, but the astronomical bill for them could prove a step too far, and the backtracking on student fees in July, with a pledge turning into an ‘ambition’, will have sown doubt in some people’s minds.

So, just as the negotiating stand-off between the UK and EU has largely been about who will blink first (the UK), so the domestic political scene faces the same challenge. The Cabinet has been prepared to back May while she stays roughly on track because of the threat of a Corbyn takeover. However, if her position becomes untenable, as looks increasingly likely, then a leadership challenge promises to be instantaneous, as both sides in the Brexit debate fear being left behind. Under these circumstances, fighting Labour at the polls becomes all but inevitable and so, ironically, the Corbyn threat disappears as a factor in tactical considerations.

If this is where we end up, then the Conservatives are up against some very hard choices. Any leadership candidate faces the currently insuperable challenge of uniting the party and instilling rigid discipline in the face of a hard left takeover by Labour, while promoting clear leadership under the banner of either the hardest or softest of Brexits.

Despite the European Commission’s own report acknowledging that no evidence exists to show terrorist-related smuggling of cultural property within the European Union, it is pressing ahead with stringent new rules to tackle the issue

COMMENT: Following on from my last blog, the European Commission’s 199-page Deloitte report into tackling cultural property trafficking now confirms that there is no evidence at all that terrorism-related material is entering the EU.

It is even helpful enough to publish a bar chart showing this, which I reproduce above.

So where does that leave us?

To recap, the EC set about investigating this issue at the beginning of 2016, because it identified trade in cultural goods as a primary source of revenue for terrorists. It concluded that a common policy approach was the way to deal with this threat, but the first thing it wanted to do was to identify how big a threat this was within the EU.

More than a year later, and after extensive research, consultation and analysis, it has concluded that the evidence is “lacking”, or rather is non-existent.

So, does it also conclude that all the existing adopted measures – the Hague Convention, UNESCO Convention, emergency regulations covering Syria and Iraq and multiplicity of other legislation – are working in preventing crime in this way?

Apparently not; instead, it seems to conclude that the absolute lack of evidence points to the system not working, and so, of course, stringent new measures are needed. However, when you add in all the other initiatives undertaken to trace looted and trafficked material within the European Union – Operation Pandora among them – and the fact that nothing has ever been found, you have to start asking if the authorities will ever accept that maybe the problem lies elsewhere.

It is a little like the medieval trial by water for witches: if they sank and drowned, it showed that they were innocent, but if they escaped and floated to the surface they were guilty, and so burned at the stake. Either way, they were doomed. It’s the same for the art market: lack of evidence of wrongdoing is never taken as a sign of innocence and compliance, just as proof that scrutiny is not good enough and the rules need tightening.

It’s another case of flipping a coin on the basis of ‘Heads, I win; Tails, you lose’.

To show that this is, indeed, the thinking, take the following statement on page 127 of the Deloitte report: “Considering the qualitative and limited reliable quantitative data available, the relatively low level of seizures could indicate the weaknesses of the current import controls system, particularly with regard to the effectiveness of the measures in place.”

In other words, if they had found significant of evidence, it would have justified new measures, and the fact that they haven’t found anything means that the system must be at fault and so needs updating.

The options under consideration

Various proposals are under consideration in the report: declarations by importers/exporters of cultural objects accompanied by Object ID passports, import licences and exports certificates. All of this would be tied into some overarching international database, require a huge budget, enforced cross-border co-operation and access to often technologically incompatible national databases (good luck with that). That’s before you get each member state to upgrade the training and expertise of customs officials.

Is it really credible to make such an enormous commitment of resources, time and money to tackle a problem that your own detailed research shows doesn’t really exist?

Nonetheless the report continues to insist that the scale of the problem is huge, relying on dodgy stats, such as the utterly unsubstantiated April 2016 claim by the Russian ambassador to the UN that ISIS was making up to $200 million a year from looted antiquities – a claim completely at odds with reports from the World Customs Organisation, Europol, Interpol and other specialists in studying this area of crime.

Slightly more reassuring is what the report states on page 134: “Addressing the illicit trafficking in cultural goods cannot take place without engaging stakeholders in the art market and society at large, taking away ignorance or un-willingness to operate on the basis of agreed Codes of Ethics (UNESCO International Code of Ethics for Art Dealers).”

Well that’s great, but to engage with people, you need to relate to them properly, not ask them for evidence and then ignore it. What is being talked about here is not engagement but the handing down of orders in a dictatorial manner. There is ignorance, and even wilful ignorance here; however, it is not on the part of the trade, but those who refuse to accept the evidence that they have spent years collecting at great cost because it does not suit their agenda.

Where the report gets most interesting is in its analysis of the effectiveness of the options it proposes.

It recognises that certification could be difficult, for instance: “Especially in conflict areas, there is not always an authority available to issue a certificate; Especially in conflict areas, the third country authorities could be affected by negative influences, essentially resulting in the untrustworthiness of the certification.”

Certification also requires a pre-existing administrative cooperation agreement between the EU and the third country, which may not be in place.

On page 158, the report does at least acknowledge that its proposals might make life difficult for legitimate business interests: “Finding the balance between the interests of traders and the interests of the authorities to combat trafficking in cultural goods is difficult, particularly with regard to this topic. Imposing a too heavy burden on traders could result in the impediment of licit trade, potentially even enhancing the trafficking in cultural goods.”

But then it spoils it by adding: “Nonetheless, considering the current state of play, the authorities are not adequately covered by a legal framework safeguarding the respect for currently existing rules and to effectively act against the trafficking in cultural goods.”

An odd way to address the current state of play

The “current state of play”. The report has just admitted that the current state of play is that there is no evidence of a problem. If that is the case, then the balance is pretty easy to find: stick with existing measures because they seem to be working.

Import declarations fare little better in the report’s analysis (although they are what it finally goes on to favour). On page 164, it declares: “The system will rely on the importer’s good faith. Moreover the information about the good that the importer will have at his/her disposal will come from the exporter to a large extent. The identification could still result in false information on the good. The importer would however bear the responsibility for such false statements. This declaration will create a burden on all EU importers who want to import goods that potentially fit in the definition of the cultural goods.”

So perhaps the answer is the fourth option, licensing. Apparently not, as the report argues on page 166: “Time necessary for receiving the license would slow down trade of antiquities and other artefacts… The cost for EU authorities to set up and operate such a system would be quite significant and the delays for imports could turn out to be prohibitive. The cost will be disproportionate for the authorities and for the market. It would also increase the price of the goods.”

It also recognises the drawback that “many third countries do not provide for such certification [which] would effectively mean that all imports of cultural goods from these countries would be blocked”. (page 167)

And where countries do provide for such export certification, but no arrangements for administrative co-operation exist between them and the EU, which would allow verification (cross-checking with the exporting country’s customs) of the certificates by EU customs, “imports would de facto also be blocked”.

Pretty unsatisfactory all round really, as the report itself concludes, but still the European Commission intends to press ahead.

Of course, one of the fundamental aspects of these proposals is the definition of “source countries”. Does the Commission mean exporting countries or countries of origin? The report doesn’t say, but this is something that really matters. If it means countries of origin, how would that work for items that left the country decades or even centuries ago? And what about countries that have no certification process? Would a French collector importing a scarab bought in a New York sale have to ask Egypt for an export licence? What would they need to show?

When you look at the list of information required under the ObjectID process, including photography, it is clear that it would quickly become uneconomic to trade in lower-value items, so a significant section of the legitimate market would be blighted anyway. And taking all of the above into consideration, while creating a considerable challenge for dealers and auction houses, it would be all but insurmountable for most collectors and private buyers and sellers.

All in all, this set of proposals is a bit of a mess, and it is all so unnecessary if you take into account the Commission’s own reasons for looking into this.

What we have here is not the proposal for urgent measures to tackle a real problem, but a bureaucratic tidying up exercise, which misses the point because it will not be replacing other measures but adding another unnecessary layer of red tape to them.

The Commission announced its proposals in July, having taken delivery of the Deloitte report in June. So why did it not publish that report until September? Could it be because it didn’t like what it had to say?

Cultural property trafficking survey appears to be little more than an exercise in complacency and cynicism as EC plans damaging new law

COMMENT: I have no idea how much it has cost the European Commission to conduct the latest survey into the illegal importation of cultural goods used to finance terrorism, but it is clearly a shocking waste of money, as its own conclusions show.

The failure to check facts or take note of detailed submissions from industry experts has been so dire in this case one can only assume that this ‘consultation’ was a window dressing exercise in cynicism or a masterpiece of incompetence. Either way, the last thing it should be used for is a template for new and damaging legislation.

To show you what I mean, let’s take the ‘Fact Sheet’ that the Commission published on July 13 to accompany its press release announcing the crackdown.

Although neither the EU nor the US has conducted a single successful prosecution or seized any material confirmed to be linked to ISIS and terrorism in Syria and Iraq, the release itself focused on how the Commission is taking action to cut off such sources of financing.

To illustrate the scope of the problem, the ‘Fact Sheet’ asks the following question:

What is the value of the cultural goods that are imported illegally to the EU?

It then sets out the following answer:

‘The value of the illegal trade in cultural goods is difficult to assess, since it is a criminal activity.

‘Reliable data and instruments for measuring illicit commerce are scarce. According to Interpol, however, the black market in works of art is becoming as lucrative as those for drugs, weapons and counterfeit goods. Some estimates suggest that in 80-90% of sales of antiquities, the goods have illicit origins. Another study suggests that the total financial value of the illegal antiquities and art trade is larger than any other area of international crime except arms trafficking and narcotics and has been estimated at €2.5 – €5 billion yearly.

‘UNESCO has also stated that, together with the drugs and armaments trades, the black market in antiquities and culture constitutes one of the most firmly rooted illicit trades in the world.’

This seems credible enough until you check what Interpol actually says and where the Commission has sourced the other figures it quotes. Let’s take these in turn:

In quoting Interpol, the ‘Fact Sheet’ helpfully includes a link to the relevant page on the Interpol website. However, on clicking through to that link, although it makes the statement as reported, Interpol then contradicts this in its Frequently Asked Questions section on the same page. Click the link and it states the following:

Is it true that trafficking in cultural property is the third most common form of trafficking, after drug trafficking and arms trafficking?

‘We do not possess any figures which would enable us to claim that trafficking in cultural property is the third or fourth most common form of trafficking, although this is frequently mentioned at international conferences and in the media.

‘In fact, it is very difficult to gain an exact idea of how many items of cultural property are stolen throughout the world and it is unlikely that there will ever be any accurate statistics. National statistics are often based on the circumstances of the theft (petty theft, theft by breaking and entering or armed robbery), rather than the type of object stolen.

‘An enhanced information exchange could assist INTERPOL in determining the importance as well as the trends and patterns of this type of crime.’

This is followed by:

What is the cost of trafficking in cultural property?

‘It is not possible to put a figure on this type of crime, partly for the reasons mentioned above and partly because the value of an item of cultural property is not always the same in the country in which it was stolen and the destination country. Also, thefts of such property are sometimes not reported to the police because the money used to purchase them had not been declared for tax reasons or because it was the proceeds of criminal activity.

‘It is also impossible to assess the financial extent of the losses caused by clandestine archaeological excavations. Such excavations often only come to light when looted items appear on the international market. Illegal excavations destroy the scientific context of the single finds and seriously jeopardize future archeological research of the sites.

‘Even without considering the economic impact behind the illicit traffic of cultural goods, it is important to consider the damage caused by this type of crime to civilizations and their history. The cultural heritage of a country constitutes its identity. A country that is deprived of its cultural heritage because it is being looted or stolen is a country that is losing its identity and every component that is linked to it: national belonging, patriotism or national pride.’

And this is followed by:

Which countries are most affected by this type of crime and which objects are most frequently stolen?

‘Due to the lack of reliable and internationally harmonized statistics on cultural property thefts, it is impossible to identify one country being more affected than the others.

‘However, it is obvious that the following regions are particularly affected by this type of crime:

Europe,

Latin America,

Middle East,

North and Sub-Saharan Africa,

South East Asia.

‘The majority of thefts are carried out from private homes. Museums and places of worship are also among the common targets.

‘The type of objects stolen varies from country to country. Generally speaking, paintings, sculptures and statues, and religious items are very sought after by thieves.

‘However, no category is spared, including such diverse items as archaeological pieces, antiquarian books, antique furniture, coins, weapons and firearms or ancient gold and silverware.’

Conflicting claims on trafficking of illicit cultural property that don’t add up

This detailed advice leads me to ask Interpol why on the page it links from it states: “The black market in works of art is becoming as lucrative as those for drugs, weapons and counterfeit goods.” By its own admission, it can’t possibly know this, and so neither can the Commission.

As noted, the Commission further states: “Some estimates suggest that in 80-90% of sales of antiquities, the goods have illicit origins. Another study suggests that the total financial value of the illegal antiquities and art trade is larger than any other area of international crime except arms trafficking and narcotics and has been estimated at €2.5 – €5 billion yearly.”

Although it does not say where these estimates and study come from, it immediately goes on to quote UNESCO, stating: “UNESCO has also statedthat, together with the drugs and armaments trades, the black market in antiquities and culture constitutes one of the most firmly rooted illicit trades in the world.”

Again, it gives a helpful link through to a UNESCO report (The fight against the illicit trafficking of cultural objects the 1970 convention: past and future), which does identify the study and estimates.

The Facts and Figures listed on page 2 of the UNESCO report include references to values for illicit trafficking ranging from $2 billion to $6 billion. The footnotes attribute the $2 billion figure to the November 24, 1990 Independent newspaper article Great Sale of the Century by Geraldine Norman. However, for two reasons it is clear that UNESCO has never checked this source – and neither has the Commission. The first is that the article, which you can read here, includes no figure whatsoever, and the second is that in referring to it, UNESCO made the same mistake that Brodie, Doole & Watson made in referring to it in their 2000 report, Stealing History: The Illicit Trade in Cultural Material. On page 23 of that report, it states: ‘Geraldine Norman has estimated that the illicit trade in antiquities, world-wide, may be as much as $2 billion a year’. On page 60 of the report, under the relevant footnote, it gives the source as follows: Norman G., Great sale of the century. Independent, 24 November 1990 – exactly the same reference as UNESCO gives, which the Commission then quotes. However, the article itself is actually titled Great sale of the centuries, which indicates that in conducting the research for the Commission Deloittes have simply lifted the UNESCO report without checking its sources, while UNESCO, in turn, lifted the claim from the Brodie, Doole & Watson report without ever checking the Norman article.

No need for this as correct information was already available

What makes this all so unnecessary is that I personally supplied UNESCO with all the relevant information correcting these and other mistakes in March last year on behalf of the International Association of Dealers in Ancient Art (IADAA), with all the relevant links for independent verification, and it was posted on the UNESCO website, where it is still available.

So what we actually have presented as ‘Facts’ by the Commission to justify its position is an unchecked quote based on a 17-year-old report, which inaccurately bases its claims on a newspaper article that was already ten years old at the time and which says nothing of the sort anyway.

What Geraldine Norman’s 27-year-old article does state is her unsubstantiated opinion that “80 per cent of all antiquities that come on the market have been illegally excavated and smuggled from their countries of origin” – hence the additional figures quoted by the Commission.

The $6 billion figure quoted by the Commission also comes from the UNESCO report, but here things get even more confused. UNESCO states that the figure comes from “Research conducted by the United Kingdom’s House of Commons on [sic] July 2000”. However, the footnote referencing this quotes a 2009 report in Italian by F. Isman of Milan and deals only with Italian archaeology. Again, this source has clearly not been checked.

There are another two possible sources for the $5-6 billion figure. According to James McAndrew, the former FBI agent who set up the US Department of Homeland Security Antiquities Division in 2010, the first is an unsubstantiated claim made by an official at an ICOM conference in the 1980s. The other is a misreading of the estimate of global art crime – in other words all crime associated with the entire art market, from fraud and burglary to forgery and theft, not antiquities at all – as estimated by the Art Crime Team of the FBI, although they do not say how they arrived at this figure and have now downgraded it to $4 billion to $6 billion as the video from this link confirms.

Reports show that neither Interpol nor the World Customs Organisation back the EC’s position

Section 6 of The World Customs Organisation 2015 report covered the illicit trade in cultural objects for the first time. It noted nothing linked to ISIS, but page 147 does state that one of its largest ongoing cases, Hidden Idol, has resulted in the seizure of $100 million of stolen and looted artefacts from India, Afghanistan, Pakistan and Cambodia.

This means that neither Interpol nor the WCO recognise the unsubstantiated figures adopted wholesale, without checking, by the European Commission in setting out its ‘Fact Sheet’ to justify the new measures.

Now look at the Commission’s reasons for introducing new measures. According to its ‘Fact Sheet’, “Recent reports have also shown that valuable artworks, sculptures and archaeological artefacts are being sold and imported into the EU from certain non-EU countries, with those profits potentially used to finance terrorist activities. For example, two Syrian friezes that may have been intended for criminal gain were seized at Roissy airport, France last year.”

Note the wording: Even here there is no claim that these had any link to ISIS, terrorism or even any crime at all, just that they ‘may’ have been intended for criminal gain with profits ‘potentially’ used to finance terrorism.

In October last year, 18 EU countries co-operated in Operation Pandora, a Europol-led exercise to find and seize trafficked cultural property funding terrorism. The authorities searched nearly 50,000 people, nearly 30,000 vehicles and 50 ships. They arrested 75 people and seized just over 3500 pieces of cultural property, 1000 of which turned out to have come from a single seizure from an illicit metal detectorist in Poland and largely consisted of spent rifle cartridges and rusted rifle stocks from the Second World War. Now Europol has confirmed that despite this operation targeting terrorism financing, not one item seized came from a conflict zone. So what it actually showed was what a good job existing laws are doing in keeping this stuff out of Europe – precisely the arguments that the trade had made during the consultation period, which the Commission has chosen to ignore completely.

The ‘Fact Sheet’ also airily brushes aside any concerns that dealers might have about the impact of the new law on legitimate trade, again utterly ignoring the serious concerns detailed during the consultation process.

This whole consultation process appears to be little more than a box-ticking exercise that barely nods in the direction of democracy. It smacks of the Commission deciding what it was going to do before any of this started and acknowledging that it had to be seen to go through a consultation process, which it has then gone on to dismiss out of hand.

The first indication of this cynical approach came at the very beginning.

Instead of consulting the trade on the future of the art market in Europe, the Commission consulted the Arts Council, one of the most ineffectual UK quangos around, and which has nothing to do with the art market.

Then there was the matter of timing. The decision to consult the market was taken on January 28, 2016, with a deadline for responses of May 28, and yet no one found out about the consultation until May 22, with some relevant trade associations never being approached at all.

The Commission’s own Regulatory Scrutiny Board (RSB) failed the first draft Impact Assessment submitted for the new proposals, criticising it for not clearly circumscribing the problem nor substantiating its magnitude, nor providing an adequate evaluation of the associated costs. The revised Impact Assessment, which was eventually passed, still did not give an accurate description of the relative size of the illicit market (as shown above), despite this being a significant demand by the RSB, nor did it provide the other relevant statistical information the RSB asked for, nor a clear view of the magnitude of the problem. So one wonders how the revised Impact Assessment passed at all.

Stringent and effective rules already exist within the EU governing material from Syria and Iraq, while other regulations already address illicit material from anywhere else in the world. Why do we need yet more and inappropriate legislation that will only serve to hamstring the legitimate market?

How can we have confidence in the EU’s leading governing body if this is the way it conducts itself?